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Christopher and Jamie Guest file a joint tax return and decide to itemize their deductions. The...

Christopher and Jamie Guest file a joint tax return and decide to itemize their deductions. The Guest's income for the year consists of 90,000 in salary, 2,000 corporate bond interest income, 800 long term capital gain, 400 qualified dividends, and 600 short term capital gain. They paid 3,000 in interest on a loan used to purchase investments. What is the amount of their investment interest expense deduction for the year?

A. 0

B. 2,600

C. 3,000

D. 3,800

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Homework Answers

Answer #1

If you itemize deuction than you may claim deduction for investment interest expense.

Interest paid on loans used to purchase investments are deductible against income from

  • Interest income
  • Qualified dividends
  • Short term capital gains

So. Interest expense of $3,000 casn be deductible against

*$2,000 Corporate bond interest income

*$400 qualified diviends

*$600 short term capital gain

The amount of their investment interest expense deduction for the year is ($2,000+$400+$600) = $3,000

Answer C)

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